UPDATE 1-European c.banks buy peripheral bonds-dealers

Wed May 12, 2010 6:19am EDT

Related Topics

* C.banks buying Portugal, Ireland, Greece bonds

* Operations of 25-50 million euro across all maturities

* Peripheral govt bonds spreads to Bunds narrow

(Adds further dealer comments)

MILAN, May 12 (Reuters) - Euro zone central banks were buying Portuguese, Irish and Greek state bonds on Wednesday in a move that is supporting a narrowing of bond spreads versus the German Bunds, dealers said.

The central banks are buying across all maturities up to 10-year bonds for amounts of 25 million or 50 million euros at a time "in a more significant and organised way" than in the first two days of the week, one dealer said.

"On Monday and yesterday they (central banks) were a bit unordered, perhaps also to see the market reaction. Today they are a lot more active," the dealer said.

As part of a $1 trillion package agreed at the weekend to shore up the euro and debt-ridden euro zone members, the European Central Bank announced individual euro zone member central banks would start buying government debt.

A second dealer said the central banks of Italy, France, Spain, Germany and Finland were intervening on Wednesday.

"They call directly the primary dealer, ask prices, check that the levels are not foolish and buy," a third dealer said.

"They buy a bit on all the maturities, from the short-term up to 10-year, for round sum amounts of 25 million or 50 million euros per operation," he said.

The banks are mainly buying Portuguese, Irish and Greek bonds, which have suffered the most, which was supporting all peripheral country bonds as reflected in yield spreads to Bunds, dealers said. (Reporting by Gabriella Bruschi; writing by Nigel Tutt, editing by Mike Peacock)

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